The growth rate of revenue and net profit remained stable. Revenue for the full year of 2023 was 164.7 billion yuan (YoY, -8.4%), net profit attributable to mother 46.5 billion yuan (YoY, +2.1%), and the annual weighted average ROE was 11.38%.
Interest rates on the negative side were all under pressure, net interest spreads narrowed, and the results of controlling the company's deposit costs gradually became apparent. Net interest income for the full year of 2023 fell 9.3% year over year, hampered by a slowdown in scale expansion and a narrowing of net interest spreads. Among them, the net interest spread for the full year of 2023 was 2.38%, a year-on-year narrowing of 37 bps. The net interest spread for the fourth quarter was 2.11%, and the net interest spread for the fourth quarter was reduced by 19 bps compared to the third quarter. On the asset side, annual loan interest rates fell 47 bps to 5.43% year on year. Among them, interest rates on public loans benefited from rising interest rates in the foreign currency market to 10 bps year on year, but due to factors such as weak residents' credit demand and companies' reduced risk appetite, personal loan yields fell sharply by 80 bps year on year. On the debt side, the annual deposit cost ratio increased by 11 bps to 2.20% year on year. On the one hand, interest rates on foreign currency deposits increased, and on the other hand, there was a clear trend of regularization of domestic deposits. The company continuously strengthened deposit cost control, optimized the deposit structure, and achieved a slight decrease of 1 bps month-on-month deposit costs in a single quarter in the fourth quarter.
Non-interest income is under pressure due to market fluctuations. Net non-interest income for the year was 46.7 billion yuan, a year-on-year decrease of 6.1%. Among them, net revenue from processing fees and commissions decreased by 2.6% year on year, mainly due to the decline in processing fee revenue from credit card business and financial management business. Other non-interest income fell 11.7% year on year, mainly due to market fluctuations, exchange profit and loss from foreign exchange business fell 3.9 billion yuan year on year.
The company took the initiative to slow down the pace of scale expansion. At the end of the period, the company's total assets reached 5.6 trillion yuan, up 5.0% year on year. Of these, total loans were 3.42 trillion yuan, up 2.3% year on year, deposit balance was 3.46 trillion yuan, up 3.2% year on year, and scale expansion slowed. Considering that China's economy is in the process of recovery, residents' demand for loans is weak, and the repayment ability of some individual customers has declined, the company has taken the initiative to reduce credit card and consumer loan investment. Overall retail loans have been reduced by 3.4% throughout the year, and risk appetite is cautious.
The company has stepped up its efforts to dispose of faults, and the quality of assets is stable. The company's non-performing loan ratio at the end of the period was 1.06%, down 1 bps from the beginning of the year and 2 bps higher than at the end of September. The company stepped up its efforts to dispose of faults and accruals, and the annual write-off and transfer scale increased by 24.6% year-on-year. Overdue loans achieved a double decline. The deviation for loans overdue for 60 days or more and the deviation for loans overdue for 90 days or more were 74% and 59%, respectively. Asset quality is stable, and the company has reduced its provision and credit costs for the whole year by 1.85%, a year-on-year decrease of 16 bps. The end-of-period provision coverage rate was 277.6%, down 5.4% from the end of September, but it is still at a good level.
Investment advice: The dividend rate was raised sharply to 30% in 2023, and the dividend rate is attractive. Considering the slow economic recovery and continued decline in LPR, the net interest spread is expected to narrow further. We lowered net profit due to mother in 2024-2026 to 472/503/55.5 billion yuan (the original forecast for 2024-2025 was 574/64.4 billion yuan), corresponding to a growth rate of 1.6%/6.7%/10.3%, diluted EPS by 2.24/2.40/2.67 yuan, and maintained the “gain” rating.
Risk warning: Macroeconomic recovery falls short of expectations and will drag down the company's net interest spreads and asset quality.